Legal Question in Business Law in California

There's no consistent formula. It depends on a variety of factors too numerous to go into detail.

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

Franchise Attorney

The rule of thumb is the "market value" of the business. There are a number of basic methods for valuing a business, and dozens or hundreds of variations. This really is a business and accounting issue, not a legal one. If the business was subject to an involuntary dissolution, the court would listen to expert witnesses hired by each partner and then make a decision based on their testimony as to what the "market value" is. So this really is a question for a business valuation expert, not us lawyers.

I use and recommend a software package called ValuAdder by Haleo Corp. for doing the calculations, but you will find the valuation is very sensitive to the inputs and assumptions used by the person running the software - if you forecast growth at 5% a year, the answer is very different than if you assume 8% annual growth. Haleo can also run analyses for you based on a large database of comparable sales, by size and industry.

The assets of the business need to be evaluated, and skill in negotiations is required. Obviously you do not want to pay more than you have to. Contact me directly.